The Charles Schwab Corporation and Subsidiaries - Page 14

                                       - 14 -                                         
          the measuring year and did not accelerate the accrual.                      
               Section 461(d) merely addresses the question of acceleration           
          and does not focus on the amount of the deduction.  It is just a            
          matter of chance that petitioner’s franchise tax liability has              
          increased each year so that the use of the prior year as the                
          measuring year results in a smaller deduction.  Conversely, if a            
          taxpayer’s income decreased, it would have a larger deduction in            
          the reporting year.  Section 461(d) simply addresses the question           
          of acceleration caused by the 1972 law.  Therefore, for                     
          petitioner’s 1989 tax year, it would use 1988 California income             
          as a base to arrive at $932,979 for Federal tax purposes.                   
          Likewise, for petitioner’s 1990 tax year, it would use the 1989             
          income as the measure and be permitted to deduct $1,806,588,                
          which includes the $873,609 which petitioner has labeled as an              
          “excess” or “carryover”.                                                    
               Finally, we note that the California franchise tax is                  
          imposed on corporations for the privilege of doing business in              
          the State of California.  Central Inv. Corp. v. Commissioner,               
          9 T.C. 128, 131 (1947), affd. per curiam 167 F.2d 1000 (9th Cir.            
          1948); see also Cal. Rev. & Tax. Code sec. 23151(a) (West 2004).            
          For years prior to the 1972 law, the tax was payable for the                
          “taxable year” as measured by the net income earned by the                  
          corporate taxpayer during the preceding year, which is referred             
          to as the “income year”.  Cal. Rev. & Tax. Code secs. 23041(a),             

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  Next

Last modified: May 25, 2011